400. The concept of an operating profit is different
from net profit because there are overheads at the centre and
various other things?
(Ms Cassoni) I do not personally know where Postcomm
drew that conclusion from.

401. You do not know where they drew that conclusion
from?
(Ms Cassoni) No.

402. You would dispute that conclusion?
(Ms Cassoni) I would have to understand where the
data came from but I think if you looked at

403. I am really just asking, you do not understand
where it came from but is it factually correct or not, that rural
and deep rural locations are both contributors to operating profit?
Is that correct?
(Ms Cassoni) It depends what they mean by it. They
are providing some income is how I hear that, and that is correct.
Are they profitable? It is not saying that.

404. This is taken from the Postcomm Report
itself and at paragraph 4.7 it states: "No individual product
category was found to be `loss-making' in aggregate and no generic
delivery density had a negative margin."
(Ms Cassoni) If you look at our regulated accounts
you can see that we do actually have loss-making products.

405. Individual products, like second class
letters less than 60 grams and in a format that cannot be processed
by a machine?
(Ms Cassoni) Yes.

406. Broadly speaking it is true, is it, that
no generic delivery density makes a loss in aggregate?
(Ms Cassoni) No. I think it makes a contribution.

407. They do make a profit?
(Ms Cassoni) No. A contribution is not a profit. It
makes a profit to the contribution but if you look at it on a
fully absorbed basis it would be loss making.

408. Is it correct that you are going to close
3,000 urban post offices?
(Mr Roberts) No.

409. That is not correct?
(Mr Roberts) No.

410. Are you going to close any?
(Mr Roberts) Yes, we may well do.

411. How many do you think that will be?
(Mr Roberts) We do not know because until we know
from the Government how much money they are going to fund for
the retirement of sub-postmasters and the consultation process
is taken forward with sub-postmasters we will not know.

412. If you had been able to invest as much
capital investment as you wanted over the last few years, how
much more do you think you would have invested than you actually
have?
(Mr Roberts) We would have probably invested somewhere
up towards a billion pounds in both automation and the infrastructure
of the organisation, particularly delivery offices.

413. How much capital investment do you need
going forward, say in the next five years, and where would you
get the capital from?
(Ms Cassoni) The investment for the next five years
I think is about 1.5 billion and we will get the capital from
the assets of the business. Basically we have got a balance sheet
that allows us to raise funds on the back of that. We have got
1.86 billion of investments which will allow us to raise borrowings.

414. That is the gilts on the balance sheet?
(Ms Cassoni) That is gilts. And we have got property
of 1.2 billion.

415. Would you consider borrowing against those
gilts?
(Ms Cassoni) We could borrow against those.

416. But you do not?
(Ms Cassoni) We do not currently.

417. They are sitting there on the balance sheet.
Are they in any real sense supporting the business or could you
sell them and use the cash?
(Ms Cassoni) The gilts that are sitting there are
actually supporting some of the short-term cash flows that Post
Office Counters requires.

418. But financially, irrespective of whether
you are allowed to or not, financially would it be possible for
you to utilise the cash represented by those gilts?
(Ms Cassoni) Yes.

419. You would?
(Ms Cassoni) Yes. That is a matter we still have to
discuss with the shareholders how we restructure the